Monday, 3 December 2012

Centrica considering £500m share buyback

The plan, most likely to take the form of a share buyback, is understood to be one of a number of options that could follow withdrawal from a project to build new nuclear plants in the UK.

The British Gas owner will announce its full-year results at the end of February, which would be the most likely point for it to review its shareholder returns.

By then, it is due to have taken a decision on whether to utilise its 20pc option in the EDF-led consortium to build reactors at Hinkley Point in Somerset. Centrica is widely expected to withdraw amid concerns over spiralling costs, with the plant estimated to cost £14bn, and doubts about the attractiveness of returns on the investment.

While it has a portfolio of investment options, including further expansion in US markets, investment in UK power generation appears uncertain. Centrica said after last week's Energy Bill that "investors require clarity and stability before committing capital and there remains much detailed work to be done in order to achieve this".

Analysts at Citigroup have calculated that from 2013 Centrica could spend £1bn on capital expenditure and £500m on acquisitions in the US or "upstream" oil and gas production assets annually while still having more than £500m "excess cashflow".